Quebec’s Groupe Mach Makes Higher Offer For Transat
Bruce Parkinson, Open Jaw
Vincent Chiara, Groupe Mach
Quebec’s largest independent real estate developer and owner has made a higher bid to acquire all issued and outstanding voting shares of Transat.
Groupe Mach Inc. is offering $14.00 cash per share, $1 more than Air Canada’s offer.
The company says the offer price represents a premium of approximately 168% over the 20-day weighted average trading price prior to the announcement of Transat on 30APR, and a premium of 24% over the 20-day weighted average trading price for the period ended 3JUN.
Mach is not the only player in the proposed deal. TM Grupo Inmobiliario, described “as the largest residential and leisure real estate developer in Spain and preferred hotel supplier of Transat in Mexico,” would get a “minority equity stake” in Transat for investing approximately $15,000,000 in cash.
It would also “roll-over its three operating hotels in Mexico with approximately 1,000 rooms under the well-established banner The Fives Hotels and Residences into Transat's platform.”
Following the acquisition, Groupe Mach would hold a minimum of 75% of Transat shares, while TM Grupo would hold up to 25%.
The deal would also require the Quebec government to provide acquisition financing of approximately $120,000,000.
Groupe Mach says the offer is a culmination of a long process undertaken since January, when it approached Transat regarding a potential negotiated transaction.
"We are excited about the potential synergies between our companies in which the leading integrated international tourism model of Transat could be combined with Mach's vast experience in overseeing the construction, ownership and management of complex real estate development projects in a cost-effective manner and its on-going initiatives at modernizing the leisure travel experience, " said Vincent Chiara, President & CEO of Mach.
The company says a deal “would provide the opportunity for Transat to pursue its 2018-2022 strategic plan more competitively in a private setting, backed by the financial strength and extensive real estate development and ownership experience of Mach.”
Mach says the offer “is in the best long-term interests of (Transat) in compliance with the fiduciary duties of the Board of Directors of Transat to act in the best long-term interests of the company.” It cites the following reasons:
Our objective is to build a global leading vertically integrated leisure travel brand under the banner of Transat;
Transat's head office, executive team and centre of decision-making shall truly be based in Montreal;
Mach is committed to reassure the Quebec Government that Quebec's interests are truly protected;
Mach shall strengthen Transat's 2018-2022 strategic plan while preserving all operating units of Transat, including its airline, tour operator, travel agency and hotel divisions;
We shall preserve existing continued operational improvements in Transat's legacy airline and tour operator segments based on Transat's existing 2018-2022 strategic plan and integrate anticipated technological enhancements provided by Mach's global leading leisure travel partners;
The hotel development will generate overall significant and sustainable profit margins for Transat in which its other operating divisions, including the airline and tourism operator will exceed the current average of over 1.2 million passengers of Air Transat travelling to sun destinations by way of travel packages;
Whereas Transat's 2018-2022 strategic plan projects 5,000 rooms within six years (3,000 owned, 2,000 managed), under the extensive real estate development expertise of Mach and TM and their significant financial capacity we plan to augment and accelerate to approximately 8,000 owned rooms and 4,000 managed rooms by such time;
We will expand the travel package experience for Canadians to include European destinations at very competitive pricing namely in Spain in which we could leverage TM's vast hotel portfolio effective in 2020;
The public markets are not the proper setting for Transat's 2018-2022 strategic plan, particularly its hotel development strategy which shall require several years for any meaningful returns to be realized in face of pressures of immediate results from the public markets;
The extensive construction, ownership and operational real estate expertise of Mach with the support of local equivalent expertise such as TM in Mexico and other sun destinations will significantly contribute to mitigating any construction and operational risks associated with Transat's hotel development strategy.
Mach says its intent is to largely maintain Transat's existing business plan as well as its management team. “Our intention is to leave management in place and for day-to-day operating control to remain with them where it belongs.”
The transaction is subject to conditions, including Transat terminating its current process with Air Canada and the execution of a confidentiality agreement between Transat and Mach which includes a period of 30 days to complete due diligence and execute a definitive acquisition agreement.
Mach says to satisfy the goals of the Quebec government it would ensure that Transat's head office, executive team and centre of decision-making would “truly be based in Montreal” and that no layoffs of current employees in Transat or its subsidiaries would result from the transaction.
Bruce Parkinson Editor-in-Chief
An observer and analyst of the Canadian and international travel industries for over 25 years, Bruce uses the pre-dawn hours to prepare a daily news and information package to keep industry members up to date.